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The European Commission

Competition

Competition

European Competition Law and Regulation in Telecoms

H. Ungerer

15/12/1997

London

SUMMARY

The 1st January 1998 will be a watershed for European telecommunications : It will open a new telecommunications era for the 380 million citizens of the European Union.

The implementation record

The implementation record by Member States is carefully monitored. The European Commission has strengthened its internal structure in this respect and has created a Joint Team between DG IV, the Competition Directorate General responsible for the liberalisation deadlines, and DG XIII, the Telecommunications Directorate General responsible for the harmonisation framework. The latest status report on implementation was issued in November ("Communication to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions on the implementation of the telecommunications regulatory package - first update" COM(97)504, 8th October 1997).

Overall, we note substantial progress : implementation of the framework by more than 90% by six of the ten Member States which had not been granted any deferments. Eight of these ten Member States have implemented more than 80% ; this means that more than three quarters of the Member States which have not been granted derogations can be said to have transposed most of the legislative framework. We are optimistic on full implementation. Competition Commissioner Van Miert has announced the rapid launching of infringement procedures where required to underline the determination of the Commission.

We have simultaneously closed the loop holes which had been left for some Member States. Derogation periods for Ireland and Portugal have been shortened to 1st January 2000, for Luxembourg to 1st July and for Spain to 1st December of next year, and Greece to 31st December 2000. This means that the EU's telecommunications market will now be fully liberalised in all Member States by the year 2000, including those countries for which transition periods beyond 1st January 1998 had been originally foreseen.

Access and interconnection

The issues surrounding access / interconnection will be the central immediate focus as we move into the first days of a newly liberalised market environment across Europe.

The framework created by the EU's Open Network Provision framework, ONP, is now being filled in at the national level by the National Regulatory Authorities, the NRAs, which have, or are being created.

At the same time, we have intensified the application of EU-competition rules to access cases. It must become clear that refusing access or imposing unfair conditions can result in anti-competitive behaviour subject to the provisions foreseen for such behaviour under competition law, including fines where required. We are developing and defining our approach to essential facilities. The Commission published a draft Notice earlier this year on the application of competition rules to the issue. We have now finalised work on that Notice and we expect adoption right after the full liberalisation date of 1st January 1998.

We have seen substantial progress during the last two months as regards access and interconnection agreements in the EU. After first benchmarking interconnection agreements in the context of the competition case against DT Telekom, the Commission generalised this approach and published a Recommendation on interconnection rates based on best practice in the EU, i.e. the three lowest interconnections rates practised or announced. in the EU at the time (UK, France, and Denmark). As regards local access rates, the recommended range is between 0.6 to 1.0 ECU/100, i.e. 0.7 to 1.2 US cents. (see Commission Recommendation on Interconnection in a liberalised telecommunications market / Interconnection pricing; C(97)3148, 15th October 1997). This will put interconnection rates in Europe among the lowest in the world.

Alliances

We assume a positive attitude towards new vertical and horizontal partnerships and ventures, as long we can be convinced of the real synergies and benefits which should form the underlying logic for the moves. Under this reasoning, we have approved the main global alliances : BT/MCI, GlobalOne, and four weeks ago Unisource/Uniworld/AT&T.

If, on the other hand, it looks more like a defensive strategy to sew up markets and shut out competitors, then EU competition rules will be used without hesitation to block the agreement.

We are watching out very closely for bottlenecks - preventing the creation of new ones and ensuring fair conditions of access where we have a fait accompli - and for any extensions of existing dominant positions.

This is just an example of our major objective : opening markets, avoiding market bottlenecks, opening the door to new development and technologies - and this means to more investment and jobs. We need the necessary incentives in the markets to fully exploit the new technological possibilities of telecoms networks on the one hand, cable networks on the other. This is what creates new markets and maximum market potential.

Convergence

We recognise that the distribution networks for the information products of the future will rely on combinations : of wired/wireless , telecom/cable, cable/satellite

This means that convergence and multi-media will be key characteristics of the future. The Commission is publishing a Convergence Green Paper on the matter

The EU-Cable Review which addressed the question of joint provision of telecoms and cable-TV networks by dominant operators in most Member States, must be seen in this context. The Review, announced in the EU Cable Directive and the Full Competition Directive was prompted to a large part by the UK experience. It addresses the issue of cross-ownership and future relationship of telephone networks and cable.

The Cable-Review is now nearing completion. The studies assess different policy options based on results of analysis of the market itself and of actual and potential policy impact on the developing multi-media market structure.

The Internet could develop into a link between current networks and the digital delivery systems of the future. To do so it would need to overcome current structural limitations and manage a breakthrough of an order of magnitude in speed and capabilities to reach true interactive voice and video delivery capability. Recent signs of convergence of the new digital TV-channels and web access in the US may point the way.

The issue is the control of the gates between the components of the future systems. We must move towards multi-media without creating new communications super-monopolies. This is at the heart of the cable issue and of the Cable Review.

Issues ahead

The 1st January 1998 will mean fundamental change of the basic conditions for doing business in the sector in Europe. The effect is magnified by the commitments taken under the WTO Agreement for the same date.

In the future, telecom companies will no longer be able to thrive if they only think national. They will have to think European and global. BT's strategic moves may serve as an illustration. On the regulatory and competition side, we will need close coopertion and interaction between the national and the European levels. Our intensifying contacts with Oftel and the Office for Fair Trading may service as an example.

Our immediate task is to make liberalisation fully effective. We are now entering a transition period, which will be a period of intensive work to ensure that competitive structures will develop, particularly in the local loop. After the change of regulation, we must address the change of market structures. This will be a difficult period which may well take us up to five years. Competition law at both European and national levels will play a major role.

The market and the consumer will be the ultimate arbiters.

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